Fitch Affirms Masisa S.A.'s Ratings
CHICAGO -- June 27, 2013
Fitch Ratings has affirmed Masisa S.A. (Masisa)'s ratings as follows:
--Foreign and local currency Issuer Default Ratings (IDRs) at 'BB';
--National scale rating of Bond Line No. 355, No. 356, No. 439, No. 440,No.
560, No. 724 and No. 725 at 'A-(cl)';
--Short-term rating at 'F1(cl)';
--Long term national scale rating at 'A- (cl)'.
The Rating Outlook is Stable.
Fitch has also downgraded Masisa's equity rating to 'Primera Clase Nivel 3'
from 'Primera Clase Nivel 2'
KEY RATING DRIVERS
Masisa's ratings reflect its sound business position within Latin America as a
leading producer of wood boards with 3.4 million of cubic meters installed
capacity. The company's operations are concentrated in Chile, Brazil,
Argentina, Venezuela, and Mexico. Masisa has Placentro retail stores and
commercial offices in Peru, Colombia and Ecuador, and exports to countries
outside the region such as the United States. The ratings further incorporate
Masisa's ownership of 224,000 hectares of plantations in South America, which
along with its forestry land, had an accounting value of USD967 million as of
March 31, 2013.
The ratings are constrained by the company's large exposure to Venezuela and
Argentina. Combined these markets represented 53% of Masisa's consolidated LTM
EBITDA as of March 31, 2013. Challenges in these markets include non-stable
currencies, political interference as well as foreign currency transference
restrictions. Masisa's net leverage is moderate with a net debt/EBITDA of 3.4
times (x) as of Mar. 31, 2013, in line with the average of last five years.
Fitch has downgraded Masisa's equity rating given its moderate stock
liquidity, as it has a market presence of 85% and USD86.5thd average traded
volume during the last year. Since the beginning of 2013, Masisa has not been
part of the IPSA (Indice de Precios Selectivo de Acciones).
EBITDA GROWTH DESPITE CLOSURE OF MONTENEGRO MDP PLANT
Masisa's EBITDA reached USD241 million during the LTM ended March 31, 2013, an
increase from USD224 million as of Dec. 31, 2012, while its EBITDA margins
improved to 17.6% from 16.6%. Latin American markets continue to show
favorable dynamics, with volume growth in nearly all markets, with the
exception of Argentina. In response to improved market conditions, Masisa has
implemented a pricing increase. The company has also benefited from a
turnaround in the U.S. housing market, which has increased its demand for MDF
moldings. These improvements helped the company offset the loss of EBITDA due
to a fire at its Montenegro MDP plant in Brazil. The main challenges faced by
Masisa are increased competition in the MDP segment in Chile and MDF segment
in Brazil. During 2012 panels sales increased 4.7% due to a 14.24% increase in
average prices, which more than offset a 1.2% decline in volumes. Sales of
other products, including MDF moldings, sawn wood, energy and doors increased
INCREASE IN NET DEBT
As of March 31, 2013 Masisa had USD991 million of consolidated debt and USD164
million of cash and marketable securities, resulting in USD827 million net
debt. This figure compares with USD724 million as of Dec. 31, 2012. Masisa's
higher net debt position is primarily due to bridge loans taken to finance the
acquisition of Rexcel MDP assets in Mexico, among other investments, and the
appreciation of the Chilean peso against the dollar. Masisa maintains a 100%
hedge of local currency fluctuation against the U.S. dollar. As of March 2013,
USD700 million, or 70% of Masisa's consolidated debt is long term. This debt
consists of USD439 million of bonds, USD241 million of bank debt and USD19
million of financing leases.
MANAGEABLE LIQUIDITY PROFILE
Masisa should meet short-term debt obligations with a combination of cash,
debt refinancing and capital increases. As of March 31, 2013, Masisa had
USD291 million of short-term debt. Masisa's Board of Directors approved a
USD100 million capital increase. During the second half of 2013, Masisa is
expected to go to the international markets to place a USD300 million bond for
debt refinancing. To bolster liquidity the company is also considering selling
non-strategic forestry assets.
SIGNIFICANT CAPEX PROGRAM
Masisa's capex program has been oriented toward strengthening its Mexican
operations due to the strong growth potential of the market, as per-capita
consumption of boards is low and the housing deficit is high. Between 2013 and
2015, Masisa plans to invest USD600 million. Key investments include the
acquisition of Rexcel and Arclin's assets, new coating capacity in Chile and
Brazil, and potentially additional organic growth in Mexico. Financing should
be with a USD100 million capital increase, USD300 million of cash from
operations (Ex-Venezuela), and USD200 million of proceeds from the divestiture
of non-strategic forestry assets. Masisa's financial strategy is to maintain
its capital structure and not to increase leverage due to higher capex.
STABLE PERFORMANCE EXPECTED FOR REMAINDER OF 2013
During 2013, Masisa's EBITDA should range between USD230 million and USD240
million and net leverage should be around 3.5x. Chile and Brazil should
represent about 45% of EBITDA. The key drivers of EBITDA improvement vis-a-vis
2012 should be a better product mix and favorable demand conditions in Brazil,
Mexico and Chile. Competitive pressure will remain high in Brazil and Chile,
which will limit price increases. In Argentina, sales should decline due to
weak macroeconomic conditions. Volumes should rise in Venezuela, but sales
revenues should decline due to the devaluation of the currency during
February. Better conditions in the U.S. should facilitate higher export
Negative rating actions could occur if debt levels increase, operating cash
flow weakens, or the political environment in Argentina or Venezuela
deteriorates further. Absent significant debt reduction, positive rating
actions are not likely in the short term due to Masisa's reliance upon
Venezuela and Argentina for around 50% of its EBITDA.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Corporate Rating Methodology' (Aug.2, 2012)'
--'National Ratings - Methodology Update'
Applicable Criteria and Related Research:
Corporate Rating Methodology
National Ratings Criteria
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Joe Bormann, CFA
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
Brian Bertsch, +1-212-908-0549 (New York)
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